We'll be back, says BHP chief

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BHP Billiton has not given up its quest for a super iron
ore price increase, even though it has to accept the same price as
its rivals.

BHP Billiton might have failed in its attempt to virtually
double iron ore prices but it will persist with its claims for a
slice of the freight savings its Asian customers enjoy when buying
Australian iron ore.

BHP iron ore chief Graeme Hunt confirmed that the company would
press the issue again next year because it was still relevant.

The Asian steel mills save around $US2 billion ($A2.6 billion) a
year in freight on the iron ore shipped from Australia compared
with the cost of shipping ore from Brazil, the other major
source.

BHP wanted to grab about $US750 million of that so that the
landed cost of Australian iron ore was closer to that of Brazilian
iron ore.

Analysts suggested that it would have a better chance next time
around as it would likely be joined in its quest by the other major
Australian iron ore exporter, Rio Tinto.

They warned against viewing yesterday's decision to accept the
same 71.5 per cent price increase taken by Rio and Brazil's CVRD as
a defeat.

After all, the price rise achieved yesterday will boost BHP's
iron ore revenues by $US1.6 billion, much of which will go straight
on to the bottom line despite the costly expansion efforts the
company is undertaking in Western Australia.

Many in the market believed BHP had a good case but, while there
was some mild disappointment over yesterday's result, it did not
come as a shock.

"It looks like they have failed," said Tim Barker of BT
Financial group, which manages $30 billion of assets.

"There had been some expectation they would get a bit more."

It was always going to be hard to push through an extra rise on
top of the 71.5 per cent already granted to Rio and CVRD, and not
just because BHP was holding out for a rise of around 100 per
cent.

"It would have been very difficult to be the one supplier which
held out against the market," said John Barkas, head of research at
the leading mining industry consultancy AME Mineral Economics.

Analysts expect BHP may have support from Australia's other
major exporter, Rio, next year, even though it would have to
informal rather than organised.

The question that no one could answer yesterday was whether BHP
will pay a price for its audacious bid to grab for itself some of
the freight savings that come with the shipment of iron ore from
Australia rather than Brazil.

In the past, negotiating indiscretions with the Japanese steel
mills have seen tonnages of iron ore reallocated from one supplier
or another as punishment.

However, with a world shortage of iron ore at present,
recriminations like that appear to be a remote possibility.